If you’re an Albertan who demands low taxes, balanced budgets, and pipelines to B.C., expect to be told to look in the mirror

PHOTOS: Alberta Finance Minister Joe Ceci, a New Democrat. Below: Former Wildrose leader and United Conservative Party leadership contender Brian Jean, now retired from politics, and B.C. based environmentalist Tzeporah Berman, very much not retired from activism.

By way of setting the stage for Thursday’s budget speech, Finance Minister Joe Ceci yesterday told the media that completion of the Trans Mountain Pipeline to the British Columbia Coast near Vancouver is the key to Alberta balancing its budget.

No, says a sharp political observer with progressive leanings of my acquaintance, figuring out a sustainable revenue source for Alberta is the key to balancing the province’s budget!

No, I can hear scores of conservative observers disagreeing with similar vehemence, a dose of fiscal realism in the form of strict budget austerity is the key to balancing our budget!

One could argue there is some truth to both those arguments – as long as balancing the budget is your principal goal and you’re prepared to pay the price that goes with both approaches, to wit, higher taxes, lower spending, or some combination of both.

Of course, putting all our economic eggs in the Trans Mountain basket may be overselling the capability of one pipeline to tidewater to solve all Alberta’s economic woes, even if the people who live on the salt chuck can be persuaded to agree with the proposition, or forced to. Still, the political appeal of the idea in Alberta is undeniable.

The NDP Government has built the impact of the Trans Mountain Pipeline into this year’s budget, Mr. Ceci noted, “because that’s what everybody believes will happen.”

I’m not so sure about that. There are people in British Columbia who think they can stop it. And the Opposition headed by United Conservative Party Leader Jason Kenney is undoubtedly praying the project will flop – preferably with environmentalist Tzeporah Berman playing a role so that they can blame the NDP for daring to employ her in their now-all-but-forgotten social license effort.

Be that as it may, Albertans need to brace themselves for a very Albertan reaction from our neighbours in British Columbia. And by this I don’t just mean from environmentalists who are unalterably opposed to any more pipelines from the tarsands (and I use that term advisedly in this context). I think a lot of British Columbians who are undecided about Kinder Morgan Inc.’s pipeline expansion megaproject, and even a few who wholeheartedly support it, will be annoyed by the suggestion they have a role they must play in balancing Alberta’s budget.

Here’s what British Columbians are going to think:

Why should we have to bear all the environmental risks and potential costs of your irrational political need to balance your budget without paying the taxes required to operate your province?

It shouldn’t be our problem if you insist on adopting irresponsible neoliberal tax policies and then can’t offer the basic level of services a civilized society demands without shipping diluted bitumen through our teritory! Just go away, and take your bitumen with you!

Trust me, this is not only what a lot of British Columbians are going to think, some of them are going to say it out loud. Never mind that taxes are pretty low in B.C. too. Remember, in many cases, public services there are worse.

You can also trust me that this is going to seriously get up a lot of Albertans’ noses.

Now, if this doesn’t sound familiar to you, it should.

After all, this is a just a slightly modified version of argument Alberta politicians have directed for decades at the governments of other provinces that have insisted on a reasonable level of social programs. It has usually been made in the context of the widely misunderstood federal equalization program, which is enshrined in Canada’s Constitution to ensure a reasonable level of public service everywhere in Canada.

Former Wildrose Leader Brian Jean put this explicitly in a 2016 opinion piece in the Calgary Herald, writing: “Why should Albertans continue to pay into a system that subsidizes cheap daycare and tuition for Quebec?”

Mr. Jean made that point while complaining about opposition to the now nearly forgotten Energy East Pipeline proposal in that province, but the argument was (and is) often made as starkly as I’ve excerpted it here.

Like Mr. Jean, Mr. Kenney says he would hold a referendum demanding removal of revenues from non-renewable resources from the equalization formula, never mind that he was sitting at the bargaining table on the federal side when the current formula was devised.

Constitutionally speaking, this would mean very little. But it might be good politics at home, especially with the conservative base.

The argument as made by both conservative leaders, nevertheless, was and is designed to exploit the same resentments among Albertans.

But you have to ask the question: If it’s an outrage for Alberta taxpayers to be asked to contribute funds that are used for social programs in Quebec, why is it not an outrage for British Columbia taxpayers to be expected to carry the risk and the costs of Alberta’s decision to provide welfare to billionaires by not having an adequate tax policy?

Because it’s in the Constitution? Oh … wait.

No one has told us to look in the mirror yet, but I reckon it’s coming.

27 Comments to: If you’re an Albertan who demands low taxes, balanced budgets, and pipelines to B.C., expect to be told to look in the mirror

Sam Gunsch

March 21st, 2018

Since Klein’s admin. took over, AB conservative gov’t’s have mostly decided AB should be governed by this motto: gov’t of the petro-rich, by the petro-rich, for the petro-rich… mostly the petro-rich mostly based in Calgary and Fort Mac.

Those that would dispute my assertion should offer some other rationale why a PC premier, Ed Stelmach, was pushed to resign after supporting a royalty review committee’s recommendation to raise royalties on oil/gas/oilsands, and why an NDP gov’t led by Mason and Notley, who in opposition both claimed that AB was getting the lowest royalties, could create a royalty committee laden with conflicts of interest and accept their recommendation that Albertans should let the industry keep it’s historically low rates.

excerpt: ‘the share of total income enjoyed by the top 10% of income earners in Alberta climbed by almost 30% between 1992 and 2007, peaking at 40.5% of all income before dipping slightly following the 2008 recession. Meanwhile, the share of total income that went to the bottom half of earners in the province dropped over the same period, and has flatlined at or below 16% of total income since 2000.’

excerpt:
‘However, in the 2008 campaign, the party only raised $580,256. Corporate contributions sank to $386,175. This is where we clearly see the link between campaign contributions and petroleum’s influence in provincial politics. The oilpatch was furious over changes to the provincial royalty regime. Significant past oilpatch-connected donors to the PCs sat on their wallets during the 2008 campaign. Notables include Canadian Natural Resources, Devon Canada, June Warren Publishing, Nexen, Precision Drilling, Suncor and Talisman plus RBC Dominion Securities and other Calgary investment dealers.’

Sam Gunsch

March 21st, 2018

Lowering royalty rates and the constant lowering of corporate tax rates in AB thru the years since Klein admin. took over remain big reasons AB is running deficits. And it didn’t happen because the ordinary citizen of modest incomes was lobbying for it. And now we’re left with considering a sales tax. Just great politics for the executive class in AB. Their concentrated political power, especially the petro-sector, got AB into this box. Raised as a Lougheed conservative, my PC’s became a market fundamentalist party once Klein took over and sold off our renewable resources for song. Stelmach at least started spending to address the infrastructure deficit that had accrued. And the NDP at least has continued that.

But AB remains a banana republic in our failure to get our fair share of non-renewable resources and tax those at higher progressive rates who profit the most from the industry, when compared to Norway with their trillion dollar fund from oil royalities accumulated on the system they observed Lougheed putting in place here.

And we expect BC folks not to notice that we blew our windfall, and continue to do so? e.g. most large oilsands operations still pay under 4% royalty rate because of the payout structure the PCs signed.

Sam Gunsch

March 22nd, 2018

re my characterization of AB as ‘banana republic’
Credit for that is due to Allan Warrack, the Lougheed minister,that helped design the Heritage Trust Fund. Think I’m harsh on AB PC’s record since Klein, on ABs ridiculously low royalty and taxation of oilsands? read this:

EXCERPT: ‘PM’s favourite province squandered its petro profits like a ‘banana republic.’ Is this any way to run an economy?
By Mitchell Anderson 13 Apr 2011;’
…
‘The royalty rate collected on oil sands projects before “payout” is currently one per cent, which according to Warrack is so low it is “like a rounding error from zero.”

He feels the lack of government oversight and fair royalty collection for the oil sands is creating a massive restoration liability. “There is going to be a thousand years of carnage left up there and we are not even getting fair money for it… I mean this is crazy, just crazy.” ;

Sam Gunsch

March 22nd, 2018

The AFL op-ed below identifies how since Klein it’s been government for the rich and corporations and trickle-down for the rest of us. This op-ed is one of only maybe a dozen for every 100 of op-eds on the pages CalgaryHerald/EdmJnl/SunNews arguing the opposite… that gifting AB’s non-renewable petro-resources to the corp’s/executive class and lowering their tax rates is sustainable and good for the rest of us:

EXCERPT: ‘For most of the past four decades, conservative governments have gambled on the price of oil, relying heavily on non-renewable resource revenue to fund our provincial operating budget. We’ve maintained pan-Canadian standards on public services while conservative governments recklessly slashed taxes on wealthy people and corporations, betting on the unprecedented good luck of high oil and gas royalties to make up the difference.’

Farmer Brian

March 21st, 2018

David, what Is becoming abundantly clear is that even though you and I have political beliefs at opposite ends of the political spectrum and would probably have different desires when it comes to what government should spend it money on, we both agree on the need for a more consistent form of revenue for the government. When I saw today that the Alberta NDP was going to show a path to a balanced budget through exporting more oil through Enbridge Line 3 and through the Trans Mountain expansion I just shook my head. I wasn’t surprised, The PC governments of Ed Stelmach and Alison Redford spent like drunken sailors hoping that the oil revenues would pay for their debochery and Albertan’s cheered them on hoping to keep from footing the bills themselves by having to pay a sales tax. Now the NDP is going down the same road, hoping that spending the proceeds from harvesting non-renewable resources to fund day to day operations rather than saving them to help fund the services of generations to come will lead them to the promised land of a second term in government. No balanced budget will be had in my opinion and it is really to bad, Alberta is a wonderful province but it’s citizens are very short sighted. Enjoy your day

pogo

Bob Raynard

March 22nd, 2018

Brian, by acknowledging that we need a more consistent form of revenue for the government, I don’t think we are that far apart politically. Essentially you are acknowledging that revenue we used to get from oil needs to come from some other source, i.e. taxes, if we are going to continue to provide the same services. That alone is enough to disqualify you from The League of Right Wing Nut Jobs that makes up Jason Kenney’s base.

While there is no doubt Stelmach and Redford increased spending I really do believe it was because during Ralph Klein’s austerity years spending was irresponsibly low, again because he wasn’t willing to impose a sales tax when resource revenue was low. I taught in rural Alberta during the Klein years. At some point the school board had a structural engineer look at our gymnasium; he suggested we not have Phys Ed classes in there on windy days, just in case.

Geoff Peters

March 21st, 2018

Yowza! Great analysis, David. Thank you for pointing out the hypocrisy running rampant. on this issue. (A message from across the Rockies.). PS. A former Trans Mountain Pipline environmental department employee was just arrested in Burnaby at a pipeline demonstration. She says we are nowhere near the technological capability of adequately cleaning up an oil spill. As for bitumen mixed with solvents? No thanks!

Tiddo

Dilbit

March 21st, 2018

Because Norway patterned their wealth fund on a model that had proven successful after more than a decade of data. Yes our Heritage! What they thankfully didn’t do was turn their country over to political opportunists to pillage their fund in favours to private interests. Corruption. The kind the Canadian Tax Payers federation of astroturf salesmen will tell you can’t happen under conservative rule.

Bob Raynard

Mark

Farmer Dave

March 21st, 2018

Farmer Brian, I agree with Sam and the Government of Alberta and B.C. will have very little say if the Trans Mountain Pipeline will get built. It will be the Oil Companies like Kinder Morgan who will get it built. B.C. gas prices are already at $1.60/L and B.C. people are already crying about these high prices. The Oil Companies will get it to over $2.00/L and using the pipeline as an excuse for high prices and then you will see the change in attitude by B.C. voters and their Government. See NOTE below:

Kinder Morgan is one of the largest energy infrastructure companies in North America. We own an interest in or operate approximately 85,000 miles of pipelines and 152 terminals. Our pipelines transport natural gas, gasoline, crude oil, carbon dioxide (CO2) and more. Our terminals store and handle petroleum products.

Athabascan

Hana Razga

March 21st, 2018

I believe that the sales tax should be introduced if/when the Notley government wins the election in 2019. By the time the next election comes around people will either get used to it or forget all about it……

jerrymacgp

March 21st, 2018

I wonder when, or if, Albertans will ever have a rational, mature conversation about taxation and the funding of public services used by the people. All we seem to get is the tiresome rhetoric about government waste, as though billions of taxpayer dollars are being flushed down the toilet.

As we have seen in the recent clanging cognitive dissonance in the Leg over rural policing, every time someone says “there ought to be a law”, there is a cost associated with that law, regulation or policy initiative; there ain’t no such thing as a free lunch. As some American jurist once said, taxes are the price we pay to live in a civilized society. Whether it’s potholes on provincial highways, long health care wait times, larger class sizes in schools, or delays in the justice system, if we want lower taxes, we
need to accept fewer services or lower service levels. Conversely, if we want improvements in all of those services, we need to be prepared to raise the revenue to pay for them, and that means higher taxes.

Taxation can also be a policy tool, by incentivizing desired behaviour, like job creation, consumer spending, and energy conservation, and disincentivizing undesireable behaviour, like smoking. Politics in a democracy is how we resolve debates over the kinds of behaviours we want to support or suppress through the tax system, and the levels of services we want from government and how we are going to pay for them. But in Alberta, all we seem to hear is a knee-jerk response that we can fix crumbling infrastructure and accommodate a growing population while paying for it all with rainbows and unicorns, along with ill-informed (or cynically manipulative) blather about equalization, as though the Government of Alberta cuts a cheque every quarter and mails it to Ontario, Quebec, and the Atlantic provinces. It has grown quite ridiculous.

Anne JW

Bob Raynard

March 24th, 2018

Jerry, thank you for a rational, mature post about taxation. I agree with everything you have written.

If Alberta got a sales tax, I hope it would also come with a regulation requiring merchants list the ‘all-in’ price most prominently, on both the item being sold and advertising material. This regulation would allow merchants to list their price and the sales tax if they wish (that is called freedom of expression) but by displaying the all-in price it would take away the constant annoyance people feel of being dinged a bit more than expected at the cash register. Service stations do this with fuel sales already, and the federal government forced airlines to something similar with all of their add-ons.

Something that GST haters have either forgotten, or don’t know, is that when the GST was first implemented, it replaced a 13.5% manufacturers’ sales tax, which was applied at the wholesale level, so consumers never saw it.

David

March 21st, 2018

This is a very thought provoking post. Alberta’s dependence on oil revenue is greater and goes back further than is generally discussed. I don’t think any of our budgets in the last 50 years would have been balanced without non renewable resource revenues, an inconvenient thought that must make Alberta conservatives squirm if they actually ever manage to think about or acknowledge it. Of course Ralph was not so much a great financial manager, but the beneficiary of record high natural gas prices during his term, which conservatives will also never admit. The Conservatives governments after him, had more than 5 years of deficits in a row, but some of those same people now sing the UCP chorus criticizing the current financial situation as if recurring deficits are somehow, something new to Alberta. How conveniently and quickly they forget their own fiscal record.

Now, Alberta is fortunate to have an abundance of non renewable resources. We weren’t blessed with a moderate climate, like some other provinces or proximity to a larger population to allow a manufacturing base to develop. We don’t have mining of gold, nickel or iron ore like some other provinces benefit from. I am sure the BC provincial budget over the years has benefited from its non renewable mineral resource and of course not being landlocked, it can and does continue to export coal to the far east. It is easier for BC and several other provinces to develop hydro electric power than it is for Alberta, although there was recently some opposition to the latest development in north eastern BC by the BC Greens, who do not seem favorable to much, if any, resource development. Unlike other parts of BC, the lower mainland is not as reliant on natural resources as most of the rest of BC. However, they rely on escalating housing prices, which may not be any more sustainable than high natural gas prices were for the previous Alberta government. It lasted for quite a while, but then it ended.

We do need to diversify our economy in Alberta and we need to consider how to make government finances less reliant on natural resources. While Alberta’s situation is more noticeable, almost every province in Canada has been built on the development of natural resources and we should also not pretend that somehow we can get by without them.